RBS Plans IPO For U.S. Arm Citizens In Next Two Years

British regulators have been pushing Royal Bank of Scotland to sell off its U.S. operation Citizens Bank and an IPO is expected in the next couple of years to sell off shares of Citizens.

British state-backed lender Royal
Bank of Scotland is set to signal this week that it
plans a partial sale of its U.S. bank Citizens this year or
next, a source close to the matter said.

RBS will say at its annual results on Thursday that its
preferred option for Citizens is an initial public offering
(IPO) in New York to sell about 20-25 percent of the bank, the
source said.

Britain's financial regulator has put pressure on RBS to
sell Citizens, which analysts have valued at between $9 billion
and $15 billion, to bolster its capital and concentrate its
focus on its core UK business.

The bank announced on Sunday that it is to cut jobs in India
as a part of its plan to wind down retail and commercial
operations in the country.

However, it is keen to avoid selling Citizens at a
knock-down price, and a partial share offering would create
price transparency and improve its strategic options, the source
said.

The board has not finalized the plan, but the Financial
Services Authority appears to be supportive, he added.

Canada's Toronto Dominion Bank has for some time
been seen as a possible buyer of Citizens. Other suitors could
include U.S. regional banks PNC and U.S. Bancorp
or Brazil's Itau Unibanco, bankers and analysts have
said.

RBS declined to comment.

The bank is under pressure to get in shape so the government
can start selling its shares. The taxpayer owns 82 percent of
RBS after a 45 billion pound ($69 billion) rescue in 2008.

RBS Chairman Philip Hampton told Reuters in October that the
bank was preparing for the government to start selling its
shares before the next general election in 2015.

The Bank of England has also said that banks need to
strengthen their capital as fines and mis-selling costs add up,
economic weakness continues and regulators impose stricter rules
on how banks assess risk weightings for their assets.

RBS Chief Executive Stephen Hester is nearing the end of a
five-year restructuring plan, which has shrunk the bank's
balance sheet by 700 billion pounds but has still left the
taxpayer sitting on a paper loss of 14 billion pounds on its
stake.

Still haunted by past mistakes, the bank is expected to
report another loss on Thursday.

It was fined $612 million last month for manipulating Libor
interest rates and is expected to set aside at least another 1
billion pounds to cover the cost of mis-selling scandals.

Sky News reported at the weekend that RBS will increase its
provision for mis-selling interest rate swaps by about 700
million pounds and raise its provision for payment protection
insurance claims by more than 400 million pounds.

RBS is also expected to shrink its investment bank further,
even though it has been cut back heavily already and accounts
for about 20 percent of the group's operating profit.